Econometric Methods with Applications in Business and Economics

814 Pages·2007·16.96 MB·English

Econometric Methods with Applications in Business and Economics
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Econometric Methods with
Applications in Business
and Economics
Christiaan Heij
Paul de Boer
Philip Hans Franses
Teun Kloek
Herman K. van Dijk
1
3
GreatClarendonStreet,Oxfordox26dp
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(cid:1)ChristiaanHeij,PauldeBoer,PhilipHansFranses,TeunKloek,andHermanK.vanDijk,2004
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Preface
Econometricmodelsandmethodsareappliedin informationexplosioninbusinessandeconomics
the daily practice of virtually all disciplines in (with large data sets—for instance, in finance
businessandeconomicslikefinance,marketing, and marketing) and the enormous growth in
microeconomics, and macroeconomics. This cheap computing power and user-friendly soft-
bookismeantforanyoneinterestedinobtaining wareforawiderangeofeconometricmethods.
asolidunderstandingandactiveworkingknow- Thisdevelopmentisreflectedinthebook,asit
ledgeofthisfield.Thebookprovidesthereader presentseconometricmethods asacollectionof
both with the required insight in econometric veryusefultoolstoaddressissuesinawiderange
methods and with the practical training needed ofapplicationareas.Firstofall,studentsshould
for successful applications. The guiding learntheessentialsofeconometricsinarigorous
principle of the book is to stimulate the reader way,asthisformstheindispensablebasisforall
to work actively on examples and exercises, so validpracticalwork.Theseessentialsaretreated
that econometrics is learnt the way it works in inChapters1–5,afterwhichtwomajorapplica-
practice—that is, practical methods for solving tionareasarediscussedinChapter6(onindivid-
questionsinbusinessandeconomics,basedona ual choice data with applications in marketing
solid understanding of the underlying methods. and microeconomics) and Chapter 7 (on time
In this way the reader gets trained to make the seriesdatawithapplicationsinfinanceandinter-
properdecisionsineconometricmodelling. national economics). The Introduction provides
This book has grown out of half a century of more information on the motivation and con-
experienceinteachingundergraduateeconomet- tents of the book, together with advice for stu-
rics at the Econometric Institute in Rotterdam. dentsandinstructors,andtheGuidetotheBook
Withthe support of Jan Tinbergen, Henri Theil explainsthestructureanduseofthebook.
founded the institute in 1956 and he developed Wethankourstudents,whoalwaysstimulate
Econometrics into a full-blown academic pro- our enthusiasm to teach and who make us feel
gramme. Originally, econometrics was mostly proudbytheirachievementsintheirlatercareers
concernedwithnationalandinternationalmacro- in econometrics, economics, and business man-
economicpolicy;therequiredcomputingpower agement. We also thank both current and
to estimate econometric models was expensive formermembers oftheEconometric Institutein
andscarcelyavailable,sothateconometricswas Rotterdam who have inspired our econometric
almost exclusively applied in public (statistical) work.
agencies. Much has changed, and nowadays Several people helped us in the process of
econometrics finds widespread application in a writing the book and the solutions manual.
rich variety of fields. The two major causes First of all we should mention our colleague
of this increased role of econometrics are the ZsoltSandorandour(currentandformer)Ph.D.
vi Preface
students Charles Bos, Lennart Hoogerheide, Arnoud Pijls, and Gerard Voskuil. Special
Rutger van Oest, and Bjo¨rn Vroomen, who all thanksareforAlettaHenderiks,whoneverlost
contributed substantially in producing the solu- hercourageingivingusthenecessarysecretarial
tions manual. Further we thank our (current supportinprocessingthemanuscript.Finallywe
andformer)colleaguesattheEconometricInsti- wish to thank the delegates and staff of Oxford
tute, Bas Donkers, Rinse Harkema, Johan UniversityPressfortheirassistance,inparticular
Kaashoek, Frank Kleibergen, Richard Kleijn, Andrew Schuller, Arthur Attwell, and Hilary
Peter Kooiman, Marius Ooms, and Peter Walford.
Schotman. We were assisted by our (former)
students Arjan van Dijk, Alex Hoogendoorn, ChristiaanHeij,PauldeBoer,PhilipHans
andJessedeKlerk,andweobtainedveryhelpful Franses,TeunKloek,HermanK.vanDijk
feedback from our students, in particular from
Simone Jansen, Martijn de Jong, Marie¨lle Non, Rotterdam,2004
Fromlefttoright:ChristiaanHeij,PauldeBoer,PhilipHansFranses,TeunKloek,andHermanK.vanDijk
Contents
DetailedContents ix
ListofExhibits xvi
Abbreviations xix
GuidetotheBook xxi
Introduction 1
1 ReviewofStatistics 11
2 SimpleRegression 75
3 MultipleRegression 117
4 Non-LinearMethods 187
5 DiagnosticTestsandModelAdjustments 273
6 QualitativeandLimitedDependentVariables 437
7 TimeSeriesandDynamicModels 531
AppendixA.MatrixMethods 723
AppendixB.DataSets 747
Index 773
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Detailed Contents
ListofExhibits xvi
Abbreviations xix
GuidetotheBook xxi
1 Introduction 1
Econometrics 1
Purposeofthebook 2
Characteristicfeaturesofthebook 3
Targetaudienceandrequiredbackgroundknowledge 4
Briefcontentsofthebook 4
Studyadvice 5
Teachingsuggestions 6
Somepossiblecoursestructures 8
1 Review of Statistics 11
1.1 Descriptivestatistics 12
1.1.1 Datagraphs 12
1.1.2 Samplestatistics 16
1.2 Randomvariables 20
1.2.1 Singlerandomvariables 20
1.2.2 Jointrandomvariables 23
1.2.3 Probabilitydistributions 29
1.2.4 Normalrandomsamples 35
1.3 Parameterestimation 38
1.3.1 Estimationmethods 38
1.3.2 Statisticalproperties 42
1.3.3 Asymptoticproperties 47
1.4 Testsofhypotheses 55
1.4.1 Sizeandpower 55
1.4.2 Testsformeanandvariance 59
1.4.3 Intervalestimatesandthebootstrap 63